As the founding editor of Morningstar DividendInvestor, I have to confess to a certain bit of annoyance when I hear the phrase "dividend trade." The idea of using high-quality, high-yielding stocks as vehicles in a short-term game of pops and drops isn't just insulting; it's bad logic. For one thing, these stocks tend to be less volatile than the market overall. If you're trying to trade, isn't more volatility what you want? For another, these dividends are so small relative to how much stock prices fluctuate from day to day.
We've learned some valuable lessons while collecting our first thousand dividends that will serve us well as we go on to earn our next thousand dividends and beyond: Lesson 1: Quality, Quality, Quality! It's possible to reduce the DividendInvestor strategy to a very simple premise: Make sure your dividends grow! Lesson 2: Dividend Investing Is Its Own Thing - Investing for dividends is not really a subset of value investing, or what most people think of as value investing. Lesson 3: Let the Dividends Do the Work! - The much-maligned buy-and-hold mentality works best, especially with large and growing dividends.